Economic Solutions, How to Overcome Inflation
Inflation is a term in economics that refers to a process of price increase - the prices in general and ongoing related to the mechanisms of the market due to various factors such as excess liquidity in the market, increasing consumption in the community, and as a result of a less smooth distribution goods.
Based on the magnitude of the inflation could digolongan into 4 parts, namely mild inflation, inflation moderate, severe inflation and most severe hyperinflation. Mild inflation usually occurs if the price increase is below 10 percent per year. Inflation is happening if the price increases of about 10 to 30 percent per year. Heavy inflation occurs if the increase in price of about 30 to 100 percent per year, while hyperinflation can occur when prices rise above 100 percent per year.
Based on the classification of inflation, real inflation could be positive and negatid. If inflation is mild, it will have positive effect can boost the economy better. However, if inflation is severe, the economic situation becomes chaotic and make the economy becomes sluggish.
To cope with the negative impact caused by high inflation, measures to do that is by monetary policy and fiscal policy.
Monetary policy is a policy relating to the arrangements in money supply so as to ensure the stability of the value. The purpose of government in tackling inflation through monetary policies which are organized and regulate the circulation of money, expand or accelerate the payment litas demand deposits, and maintain a stable value of money both for domestic and foreign payments.
Fiscal policy is a policy that deals with the state government financially. This policy can be conducted are set revenues and expenditures of government or, and raise taxes. With the decision to raise taxes, then the consumer is expected to reduce the amount of consumption as incomes partly used to pay taxes. In addition to the tax increase also led to the receipt of money in the community to be reduced and the demand for goods or services that are konsumfit can be reduced.